Kimberly-Clark (KMB) Queued for Q3 Earnings: Things to Note

Kimberly-Clark Corporation (NYSE:KMB) KMB is likely to display year-over-year growth in the top line, when it reports third-quarter 2021 numbers on Oct 25. The Zacks Consensus Estimate for revenues is pegged at $5,003 million, suggesting a rise of 6.8% from the prior-year quarter’s reported figure.

The Zacks Consensus Estimate for earnings has moved down by a penny over the past seven days to $1.66 per share, which indicates a decline of 3.5% from the figure reported in the prior-year period. In the last reported quarter, the company delivered a negative earnings surprise of nearly 15%. The company has a trailing four-quarter negative earnings surprise of 4.4%, on average.

Key Factors to Note

The company has been encountering high input costs and elevated other manufacturing expenses for the past few quarters. On its last earnings call, management stated that key input costs for 2021 are now estimated to flare up $1,200-$1,300 million compared with the $900-$1,050 million projected before. The updated input cost guidance is accountable to the higher polymer-based materials and pulp costs. This also raises concerns over the quarter under review. Apart from this, consumer tissue volumes in North America are seeing tough comparisons with the record jump in the year-ago period, as retailers and consumers in the region have been curtailing inventory and at-home stocking.

Nonetheless, Kimberly-Clark has been taking robust steps to lower costs. This is highlighted by the 2018 Global Restructuring Program as well as the Focus on Reducing Costs Everywhere or FORCE Program. While input costs are expected to flare up in 2021, management on its second-quarter earnings call stated that it is focused on undertaking relevant pricing actions to counter the inflation and efficiently manage costs. Also, management expects total cost savings of $520-$560 million in 2021, including $400-$420 million from the FORCE program and $120-$140 million from the 2018 Global Restructuring Program. These factors, along with the company’s focus on strategic growth pillars, bode well for the quarter under review.

The company’s strategic growth pillars include focus on improving core business in the developed markets; speed up growth of the Personal Care segment in the developing and emerging markets, and enhance the digital and e-commerce capacities. The company has been progressing well with these objectives, which have been aiding its portfolio and expanding the global business. Notably, Kimberly-Clark recently completed the acquisition of Softex Indonesia — a leading player in the Indonesian personal care market. The net impact of the Softex Indonesia buyout and business exits related to the company’s 2018 Global Restructuring Program boosted Kimberly-Clark’s top line by 2% in the second quarter. Management expects the Softex Indonesia acquisition to increase the overall sales by 2% in 2021, which will likely impact the third-quarter performance as well.

What the Zacks Model Unveils

Our proven model doesn’t conclusively predict an earnings beat for Kimberly-Clark this time around. The combination of a positive Earnings ESP, and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Kimberly-Clark currently carries a Zacks Rank #3 and has an Earnings ESP of -0.15%.

Stocks With Favorable Combinations

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season.

Hershey HSY has an Earnings ESP of +1.02% and carries a Zacks Rank #2, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Coca-Cola Company (NYSE:KO) KO has an Earnings ESP of +0.75% and carries a Zacks Rank #2, currently.

The Estee Lauder Companies EL has an Earnings ESP of +0.24% and currently holds a Zacks Rank #3.

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